Zara Marketing Strategy

Executive Summary

The aim of the study is to highlight the marketing strategies of a fast-fashion retail store by the name Zara. Zara is a fast-fashion store that is owned by a holding company called Inditex, the organization has been able to lead the fast-fashion store with over 2200 outlets across the globe. The study will show its internal and external factors covered by the situation, pestle, and swot analysis to show what factors affect the organization and its marketing strategies. Furthermore, it highlights Zara competitions such as H&M and gives the competitive advantage that is the focus on customer’s needs with its vertical integration helping to deliver the products to the customers faster. The company prides its self on the delivery of quality and affordable products. It has different new trendy products in the market for the spring and winter season of 2022.

Introduction

The purpose of the study is to highlight Zara’s marketing strategy for its new product launch and to analyze its internal and external factors. The study investigation will show how the organization has been able to thrive through the ongoing covid-19 pandemic and has adopted a different business environment in order to achieve its business goals and objectives. Furthermore, it will highlight its competitive advantages such as its vertical integration in its supply management to be able to ease lead time when it comes to delivering quality and affordable products.

Situation Analysis

The report seeks to investigate which new products the organization Zara has launched for the year 2022 are its spring and winter collections in its markets in the European Union such as the Zora puffer jacket that retails for £ 29.99, Asymmetric ruffled bodysuit retailing for £ 7.99, and Linen blend dress with faux pearls retailing at 19.99 (Jordan, 2022). The organization has stores in different parts of Europe such as Spain with 279 stores, France with 118 stores, Italy with 96 stores, Germany with 71 stores, Portugal with 71 stores, Poland with 44 stores, Greece with 40 stores, the Netherlands with 29 stores, and Belgium with 30 stores in 2021 (Statista, 2021).

The apparel market in Europe is influenced by multiple trends, the first major trends that affected the fast fashion organization are sustainability, transparency, and corporate social responsibility. The second trend is how technology influences sales, the production process, and the relationship or interaction between suppliers, buyers, and consumers (Brian, 2021).

PESTLE Analysis

PESTLE analysis refers to the external factors or macro-environmental factors that influence a company’s strategic decision-making. PESTLE stands for the political, economic, social, technological, legal, and environmental factors.

Political factors affecting Zara:

• Europe trade agreement: The organization being from Spain a member of the European Union it enjoys fewer tariffs and doesn’t face border restrictions this makes distribution and trade with other countries easier.
• Raw material import and export: The Company can import and export without paying extra taxes on its raw materials and disperse its finished goods throughout Europe due to the European Union trade agreement. Due to Brexit, the exit of Britain from the EuropeanUnionn has affected the company in a huge way because they will have to pay taxes to get what was its largest export market.
• Financial regulations: in a report by the European commission the organization was using a corporate tax avoidance system, between 2011-2014, bypassing countries with higher taxes such as Spain which is said could have lost pounds 218 million from the company, France approximation of its loss was pounds 76 million(Valero, 2016).
• Political unrest

Economical factors:

• Organizations products are economical and trendy
• Opportunities for employment in Spain
• The spread of coronavirus
• Brexit
• The rising cost of raw materials

Social Factors:

• Social trends that keep changing
• Cultural influence
• Product range
• Fashion brand

Technological factors:

• E-commerce
• RFID Technology
• Communication Online
• Data Analysis
• Collaboration with Technology Companies

Legal Factors:

• Copyright laws
• Labor law issues(Shaw, 2020)

Environmental factors:

• Impact of fast fashion
• Eco-friendly commitment(Bush, 2019).

SWOT Analysis

This is a strategic management and planning technique that an organization uses to identify its strengths, weaknesses, opportunities, and threats.

Strength

• Fast supply chain: the company has incorporated a balance between supply and demand to make it successful. It launched RFID technology in 2014 in its retail stores it uses the tool to share information and increase its flexibility.
• Location of retail store: The organization has the highest numbers of retail stores in the world with over 2270 stores across the globe. Spain where the organization started from have 279 stores in 2021(Statista, 2021).
• Unique layout: The layout of decoration, products and use of technology in the retail stores of Zara give customers a unique customer service experience that is good for return sales.

Weakness:

• Reliance on physical stores: the organization relies too much on its physical locations or retail stores for sales and growth. Due to changes in the business environment the organization achieved 89% sales in the year 2020 in comparison with 2019.
• Poor working conditions for employees: the organization has approximately 7108 factories globally with over 1520 suppliers, even with an established strict code of conduct and company policies in some areas such as Myanmar where they have established suppliers workers work under poor conditions. Spain with its unemployment rate being so high the employees work under low wages.

Opportunities:

• Eco-Friendly: this is an environmental factor that the organization is seeking to address that is working towards sustainability with actions such as developing health and safety, integrating environmental and social sustainability. In Spain it has already started garments that are labeled Join life, these garments are made by raw materials and processes that reduce the impact of the product on the environment. By 2022 the organization will make 50% of its garments meet the join life standard (Fashion United, 2021).

Threats:

• Competition: The organization has stiff competition in the fast fashion industry with its chic design not being the only one in the market, other competitors are Mango, H&M, Marks & Spencer, Gucci, and Forever 21. With the woke culture that millennials and Gen Z have due to information being readily available the company should make the business sustainable ecologically and economically to attract the environment-friendly generations. The organization’s dependency on cheap labor and raw materials might decrease its profitability when both the raw materials and labor become more expensive(SWOT Analysis, 2021).
• Government policies: The Spanish government passed rules and regulations to reduce the effects of coronavirus and shut down all retail stores which affected Zara’s sales in 2020. The organization had to go online in order for them to survive huge losses(Shaw, 2020).

Competition and Competitive Advantage

Zara’s competition is H&M, COS, Uniqlo, Fashion Nova, Everlane, Urban Outfitters, Forever 21, Mango, and Gucci. The biggest competition for the organization is H&M which also has a global presence with more than 5000 stores across more than 70 countries. H&M has more experience in the fast fashion industry since it was formed 28 years before Zara. The company H&M is still expanding to regions where Zara has not gone giving it a competitive advantage and is predicted to pass Zara to be the leading fast fashion retail store. The second fast-fashion retailer that is competing with Zara is the Japanese-based company called Uniqlo. Uniqlo dominates the Asian market where it has bitten Zara in sales and has invested in its online platform. The organization Uniqlo has innovative heat tech ultra-warm clothing for winter sports and extremely cold climates, the innovation is taking customers from Zara to different countries (WCS, 2021).

Porter’s five force analysis of Zara

(Adamkasi, 2017).

Competitive advantage

• Customer-centric: Zara tends to focus on customer’s needs this has made the brand a success, an example of this is when a lady called Miko went into one of its stores in Tokyo in 2015 to ask for a pink scarf, this happened also in Toronto from a lady named Michelle, in San Franciso to Elaine and Frankfurt to Giselle, they could not find a pink scarf after 7 days the organization had over 2000 of its stores selling pink scarves with 5000,000 scarves up for sale. This shows how the company’s customer insight helps the organization compete, innovate and give better customer satisfaction. Employees are trained on customer sensitivity and to meet customers’ needs in order to get repeat business or customer retention, customer loyalty, and customer satisfaction which translates to an increase in their profit margins.
• Efficient supply chain: The Company can take about 15 days to produce a product from sketch to the stores for consumers this enables the fast fashion retail store to meet customer demand faster. Zara has a very efficient vertical integrated supply chain this means it has encompassed design, making of the design under it making it able to export its products for 24 hours, in a year. This helps the store ship its products to retail stores twice a week. Zara’s vertical integration helps the company retain control on many aspects such as dyeing and processing, getting fabric on-demand, this eliminates the organization’s need for a warehouse and reduces the effects of demand fluctuations.
• Sustainability is a core value of Zara’s business: The organization has put in more effort to commit to the environment and the people which resonates with the newer generation that is gen Z and the millennials who prefer the store, this translates into an increase in the company’s profit margins. The organization has ensured employees’ rights are there with a continuous improvement program, the organization spends more than $ 50 million on community and social programs. A program for physical and mental disabilities was started in 2002 to help them socially integrate. The organization complies with the United Nations Sustainable development goals, Inditex holding has a vision 2025 to sell all-cotton, polyester, and linen clothing that is sustainable or recycled, and organic(Pratap, 2019).

Evaluation of the current marketing strategy and performance

Zara has started to adopt a collaborative marketing strategy in different parts of the globe however in Europe it does To be able to get a clear insight on Zara’s marketing strategy the 4P’s marketing mix is used that is product, place, price, and promotion

Products: The Company is in the fast fashion industry which means it produces quality and affordable items that are trending in a quick response to meet customers’ demand. This is the biggest source of the organization’s reputation and fast growth. The organization’s product is trendy designs or latest fashion wear that has adopted the local tastes and is very affordable.

Place: Zara has invested in high-end locations and has almost 3000 stores globally, it also has a vertically integrated system that incorporates design, manufacture, and distribution in-house without the help of suppliers.

Price: The organization focus on middle-income individuals it keeps the quality of its products high however the products are affordable for its target customers. The way Zara has placed its pricing enables the company to be able to get a high consumer segment and it does not compromise on its quality which gives it a competitive advantage over rivals such as Uniqlo and Hugo Boss.

Promotion: The Company does not spend a lot on advertising it depends more on word of mouth and opening stores. Their strategy for promotion is based on exclusivity, affordability, differentiation, and experience for the customer/ (Thomas, 2022).

Part 2: Introduction

Rationale and attribute of a new product with new marketing strategy

The covid-19 pandemic has changed how the fast fashion retail industries conduct business and has made E-commerce an essential part of the business. Zara has expanded on its online presence due to the fact that walk-in customers were reduced across the globe following the different policies countries have adopted to reduce the spread of coronavirus. Rules such as social distancing, wearing of masks, stores being closed, sanitization, and working from home this has encouraged the growth of E-commerce. Zara has adapted and diversified with it having collaborations with different companies in order for it to build brand awareness and expand into different markets. The company has partnered with different organizations in recent years the rationale behind this is to adapt to the rapidly changing business environment that is going online, the company collaborated with PlayStation to release sneakers in July 2020. The organization partnered with Everlast in January 2021 this is to reduce competition between the two fast fashion retail stores and help mitigate the effects of coronavirus. This has helped the company’s awareness go up. It has also collaborated with Kassl, Charlotte Gainsburg, Ader Error, TRX, and Lanza Tech, this will help the company diversify its portfolio with products such as clothing made from carbon emissions, home fitness, and digital and physical outfits (Parisi, 2021).

Brand awareness: Customers are aware of the brand due to word of mouth and experience and the organization’s ability to keep up with affordable fashion trends and of high quality.

Market share: In 2021 the company’s online store through mobile and desktop total visit is 100.67 million, the organization’s valuation went down due to the closing of most of its retail stores because of a covid-19 pandemic from a valuation of 18.4 billion U.S dollars in 2019 to 13.1 billion in 2021.

Segmentation Targeting and positioning

Segmentation

The organization uses a mix of psychographic , geographic, and demographic segmentation strategies to grow its customer needs and satisfaction

Positioning

Zara is focused on customer satisfaction or it is customer-centric which means it puts its customers first from purchase to customer care. (Bhasin, 2018)

Targeting

Zara’s target market is the young generation especially the millennials, the company gets its customer targets needs with them wanting trending, quality, and affordable products. The company provides over 450 million designs and styles of its products throughout the year.

Recommendation marketing objectives and goals

• Improving media voice: The organization should use influencers, who are already having a lot of followers around the globe to market their apparel. This is the modern way of advertising brands by using other brand names that are famous this reaches a lot of customer base which helps in getting revenues or sales up. The internet can reach more people by sponsoring more ads on sites such as Facebook, Google, Instagram, and Twitter this will reach the intended demography of 18 to 40.
• Increasing demography: The population is increasing at a rapid pace and with an increase in population the young demography from 1 to 35 making most of the population on earth, company policy on the targeted demography should change. This would help the company be sale more clothes and reach more customers.
• Innovation: with the increase in competition, Zara should innovate to keep up with the changing times in order not to find itself relevant with competition from online companies such as Amazon to Nike who is using science to gain a competitive advantage.
• Improving work safety: Zara over the years has gotten bad reports on human rights violations at the overseas manufacturers that are outsourced, the organization should come up with strategies to help mitigate these factors. Safety for workers, equal pay for equal work of different genders, skills training, and appraisals for workers, the workers should be let to unionize to get better representation and have better pay. Improving worker’s conditions makes them more effective and help in increasing production (Azhar, 2021).

The marketing mix

The 4p’s that is a product, promotion, pricing, and place are used to determine the marketing strategies of the organization

Zara product: Zara offers different products for women, children, and men this ranging from tops, jeans, trousers, knitwear, accessories, shoes, t-shirts, bags, and skirts

Zara pricing: the organization provides a high-quality product that is low in price and varies in different countries. It can afford to lower its prices more than its competitors due to the fact that it gets its raw material cheaply, does not advertise only using word of mouth, and has a low paid workforce due to the fact that it’s based in Spain. It sets the market-based pricing strategy this aligns with what the target market is willing to pay for its product giving it an edge over its competitors.

Zara distribution and place strategy: The organization has a global reach with over 2200 outlets worldwide and has been aided with the rapid growth of e-commerce to put its products on different online platforms. It has vertically integrated meaning from design to distribution the organization does it house this reduces supplier power and helps the company lead time, this intern helps meet customers’ needs and increase customer satisfaction, retention, and loyalty leading to an increase in sales and profit margins.

Zara promotion strategy: The organization relies on its high-end location, word of mouth, and customer experience to help promote its brand. It sells its brand by improving lead time and keeping up with the trends, having an affordable quality product.

Conclusion

In summary, the report highlights the launch of Zara’s new product with internal and external analysis of the factors that affect the organization. The purpose of the report was to show the company’s strategic marketing in the launch of its new products and how it has been able to adapt to the change in the business environment, that is in the midst of a pandemic going from brick and mortar or physical retail store to increasing its presence online.

Bibliography

Berbiche, N., Hlyal, M. and El Alami, J., 2020, April. Exponential success through integrated supply chain optimization, emotional intelligence and reputation-based leadership: Zara model. In IOP Conference Series: Materials Science and Engineering (Vol. 827, No. 1, p. 012058). IOP Publishing.

Chunling, L., 2020. Analysis on the Marketing Strategy of Fast Fashion Brand Zara Based on 4c Theory.

Duoyan, H. (2021, April). Research on ZARA Strategy from the Perspective of SWOT Analysis Method. In 2021 6th International Conference on Social Sciences and Economic Development (ICSSED 2021) (pp. 201-205). Atlantis Press.

Ha, J., 2021. Zara Strategic Analysis.

Li, Y., 2021, September. How Should Zara Optimize Its Marketing Strategies to Cater to the Needs of New Generations–Gen Z and Millennials. In 2021 International Conference on Financial Management and Economic Transition (FMET 2021) (pp. 305-311). Atlantis Press.

Lin, Y.E., Li, Y.W., Cheng, T.Y. and Lam, K., 2021. Corporate social responsibility and investment efficiency: Does business strategy matter?. International Review of Financial Analysis, 73, p.101585.

Appendix A:

Company/Brand Background and profile

Fast fashion refers to clothing that is produced rapidly and cheaply by mass-market retailers and responds to emerging trends. Zara is a fast-fashion retail store that was started in 1975 as a family business in Galicia, Spain by Rosalia Mera and Amancio Ortega. The first store had low-priced lookalike clothing, shoes, and other products from high-end brands. The store was a success and more locations were opened up throughout Spain. In the 1980s, Amancio Ortega the founder decided to change the manufacturing, distribution, and design process in order for the company to reduce lead time and keep up with the fashion trends which he named instant fashions. Zara started expanding to the international market in 1980 through Porto, Portugal. By 1985, the company was incorporated into a holding company called Inditex. The company rapidly expanded into the United States in 1989, France in 1990, Mexico in 1992, Greece in 1993, Sweden and Belgium in 1994. The company has become popular especially among young people, 2020 Zara had reached 96 countries and opened up 2259 retail stores. Zara has become the main source of income for Inditex holding company, with a contribution of 68.9% in 2017, 68.8% in 2018, and 69.4% in 2019. The brand gained its leadership position distinguishing its self from its competition by having a high-end location, sophisticated supply chain, and has a minimal budget for advertising. The value of the company in 2019 was approximately 18.4 billion dollars, however, due to competition and the recent covid-19 pandemic it has gone down to an approximation of 13.2 billion U.S dollars in 2021 (Statista, 2021).

Source (Ahmed, 2017)

Appendix B:

PESTLE Analysis

Source (Rahaman, 2021).

Appendix C:

(NIcepng, 2021)

Appendix D:

Marketing Strategies Segmentation Targeting and Positioning

Zara positioning

Source (Rehom, 2015)